California poised to adopt first-in-nation energy storage mandate

A California law that requires utilities to get 33 percent of their electricity from renewable sources like solar and wind is widely credited with accelerating the state’s cleantech economy. Now state regulators are poised to compel utilities to invest in “energy storage,” which could jump-start technology long considered the holy grail of the electricity industry.

On Thursday, the California Public Utilities Commission is expected to vote on a groundbreaking proposal that would require PG&E, Southern California Edison and San Diego Gas & Electric to collectively buy more than 1.3 gigawatts of energy storage by 2020 — roughly enough electricity to supply nearly 994,000 homes.

The first-in-the-nation mandate is expected to spur innovation in emerging storage technologies, from batteries to flywheels. Once large quantities of energy can be stored, the electric grid can make better use of solar, wind and other technologies that generate energy sporadically rather than in a steady flow, and can better manage disruptions from unpredictable events such as storms and wildfires.

“There’s plenty of sun out there, and it’s going to take storage,” Gov. Jerry Brown said in a speech at a solar industry conference in San Francisco this summer. “We need to bottle sunlight.”

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With the U.S. economy more dependent than ever on a steady supply of electricity, and as climate change creates more extreme weather events like Hurricane Sandy, experts say electric grids need to be equipped with tools to better manage volatility and unpredictable outages. And as more renewable energy comes online, utilities face a growing problem of “intermittency” because the sun doesn’t always shine and wind largely picks up at night, when demand from households and businesses is low. Grid operators are eager to find ways to store energy during off-peak times for use during peak hours, to avoid having to boot up “peaker” power plants that run only in times of high demand.

California’s policy innovation on energy storage is being closely watched around the country.

“This is transformative,” said Chet Lyons, an energy storage consultant based in Boston. “It’s going to have a huge impact on the development of the storage industry, and other state regulators are looking at this as a precedent.”

Utilities, leading energy companies, Silicon Valley startups and researchers at the nation’s top universities and national labs have been searching for cost-effective ways to store energy for future use. Several different kinds of storage technologies are being developed. Pumped storage projects move water between two reservoirs at different elevations. When demand is low, electricity is used to pump water from the lower reservoir to the upper reservoir; when demand is high, the water is released through a turbine to generate electricity.

Flywheel energy storage accelerates a rotor to high speeds, creating a kinetic battery. And there is a lot of focus on stationary batteries, from lithium-ion to sodium-sulfur.

But the market has been slow to develop. Several utilities have small pilot projects in the works, but nothing on a large scale. PG&E’s Yerba Buena Battery Energy Storage System Pilot Project, based in East San Jose, charges batteries when demand is low and sends stored power to the grid when demand grows, allowing operators to balance supply and demand. The project, which cost $18 million, uses the sodium-sulfur batteries made by NGK in Japan that have 4 megawatts of capacity and can store electricity for roughly six hours.

Ratepayer advocates, utilities, environmental groups and several storage companies, including Primus Power of Hayward and MegaWatt Storage Farms of Los Altos, have filed comments about the proposed storage mandate and offered various suggestions for how to improve it.

What is unclear is how the storage mandate will impact the rates that consumers pay for electricity; the full impact on bills won’t be known until after the procurement process begins. California’s proposal requires utilities to look at cost-effectiveness when evaluating storage technologies, considered key because the storage market is so new and still developing.

“This is forging new ground,” said Chris Shelton, president of AES Energy Storage in Arlington, Va. AES, which uses lithium-ion batteries as its storage technology, is a leading player in the industry, with 100 megawatts of energy storage installed in the United States. “California is saying that storage isn’t an add-on. It’s saying that these new solutions have to be cost-effective, which is key if storage is really going to be viable.”

The proposed energy storage decision was written by PUC Commissioner Carla Peterman, who was appointed to the agency by Gov. Jerry Brown in late 2012. She notes that storage devices are commonplace: Think about the batteries in consumer electronics, or Tupperware, or the fat cells in our own bodies. But the ability to store electricity on a large scale to save it for when it is most needed has been elusive.

“Integrating renewables is complex, and the complexity is increasing as more solar and wind comes online,” said Peterman, who previously served on the California Energy Commission. “Storage has a lot of potential, but there’s no one solution. We need to develop this market to see what the potential is.”